One of the main criticisms of consumer-driven health care is that, today, consumers have no way of figuring out how much a particular health care service costs. Indeed, one of the reasons that health care is so expensive in America is because people have no idea what they’re paying for it. Hence, it’s important for reformers to encourage hospitals and doctors to become more transparent about the prices they charge for these services. But an Arizona bill to do just that was killed—by the state’s Republican legislature.
Yesterday, Chad Terhune of the Los Angeles Times told the story of Jo Ann Synder, a woman who was charged $6,707 for a CT scan, after she had undergone colon surgery. Her insurance plan, Blue Shield of California, billed her for $2,336, and paid for the rest. But Snyder was shocked to discover that, if she had paid for the scan herself, out-of-pocket, she would have only had to pay $1,054.
“I couldn’t believe it,” she told the Times. “I was really upset that I got charged so much and Blue Shield allowed that. You expect them to work harder for you and negotiate a better deal.”
Los Alamitos Medical Center, Terhune found, charges $4,423 for an abdominal CT scan. Blue Shield’s negotiated rate is about $2,400. But Los Alamitos told Terhune that its cash price for the scan would be $250.
The failure of reform in Arizona
In Arizona, a state senator named Nancy Barto (R.), who chairs the senate’s Health Care and Medical Liability Reform Committee, sponsored a bill, SB 1384, targeted directly at this problem. The bill would require health care facilities to “make available to the public on request in a single document the direct pay price for at least the fifty most used diagnosis-related group codes…and at least the fifty most used outpatient service codes…for the facility.” Doctors would be similarly required to publish the direct-pay prices for their 25 most common services.
The idea is that patients who have health savings accounts need to know what various doctors and hospitals charge for their services, so that they can shop for value when they need care.
Sen. Barto’s bill passed the Arizona Senate, but it died in March in the state’s House of Representatives, where Republicans in the House Judiciary Committee refused to send the bill to the full House for a vote. (Republicans control both houses of the Arizona state legislature, along with the governorship.)
“Do we want free market health care?” Sen. Barto asked in a recent blog post. “Then why have common sense reforms that will produce one been opposed, defeated and/or vetoed at the legislature for the last 2 years—even though we have a Republican Governor and Republican supermajority?”
It’s a good question. “The short answer,” she writes, “is swarms of lobbyists. The longer answer is legislators succumbing to lobbyists on issues that should be rather plain.”
Price transparency seems like the kind of thing that everyone should be able to rally around. But you’d be wrong. Pretty much everyone in the health-care world—other than the patient—has an interest in keeping prices opaque.
Mayo Clinic doctor: transparent prices would 'confuse' patients
Eric Novack, an orthopedic surgeon in Glendale, Arizona, fought a lonely crusade for Barto’s bill. According to Novack, it was a miracle that the Arizona bill passed the state Senate. Senate Majority Whip Steve Pierce, alleges Novack, “slowed the bill down at the strong suggestion of representatives from the Governor’s office.” (Gov. Jan Brewer’s chief of staff has ties to the health care industry.)
In fairness, the state's Democrats were nearly uniformly opposed to the measure, as well. Lobbyists, says Sen. Barto, "nearly killed [the bill] in the Senate, where, after passing the Senate Committee, opponents descended upon Senate leadership personally and the bill nearly didn't come to the floor. Obviously there is something more at stake."
Most doctors and hospitals would rather not post their prices, because then patients would shop around, placing pressure on their incomes. Insurers don’t like price transparency, because they view the rates they negotiate with hospitals and doctors as proprietary trade secrets that give them an advantage over their competitors. Suppliers of medical products, of course, also benefit from high prices.
“At the final stakeholder meeting,” says Novack, “it was 50 representatives of the health-care industry against one person: me.” You can guess who won. “One physician that was there, representing the Mayo Clinic, claimed that disclosing prices would confuse patients since they might choose cost over quality,” says Novack. “This got a near-collective head nod from all.”
Wait. So if patients got to see how much health care actually cost, they’d be “confused.” As compared to the clear-as-mud system we have today?
It’s not a credible argument. When it comes to health care, patients will be even more demanding of quality than they are in other aspects of their lives. It’s the providers who aren’t providing high-quality care who should be afraid.
Transparency dramatically reduces health-care costs
Not all providers everywhere are against price transparency. The pioneering Surgery Center of Oklahoma, led by G. Keith Smith, posts prices online for the full range of surgical procedures that they perform. “Our prices are so low in comparison to what others are charging,” says Smith, “that our competitors are feeling the pressure, and are beginning to lower their prices as well.”
Observes Daniel Anderson, “The clinic simply posts their prices on their website, and those prices are often [50 to 75 percent] lower than [those of] most major hospitals. The clinic is drawing in both the insured and uninsured, not to mention out-of-state and even foreign patients.”
Some libertarians argue that it’s not kosher for free-marketeers to force health care providers to post prices. People should be free, they say, to hide their prices if they want to. After all, we don’t seem to need to force Best Buy or Amazon to post their prices. And it’s true that, in a dream world where everyone buys insurance for themselves, and everyone has a health savings account, such measures might be less necessary.
But that’s not the world we live in today. Today, if you try to buy health care on your own, government policies and industry stakeholders do everything possible to make your life miserable. Transparency is the sort of thing that Republicans and Democrats should be able to agree on. But instead, they’ve agreed to let industry lobbyists preserve the status quo.
Follow Avik on Twitter at @aviksaroy.